Glossary

Abortion Costs

Costs incur­red when a tran­sac­tion does not go through; also called broken-deal expenses.

Accordion Feature

option, which allows the borrower to set the maxi­mum Increase loan amount or incur addi­tio­nal debt under the terms and condi­ti­ons set forth in the loan agreement.

Acquisition line

Commit­ted and to be covered by banks’ capi­tal accor­ding to CRD IV. under­pin­ning frame­work loan for acquisitions.

Add-Ons

Acqui­si­tion of addi­tio­nal compa­nies or assets.

Added Value

Value added by the inves­tor to the inves­tee through exis­ting networks, know­ledge and support.

AIFMD

Abbre­via­tion for Alter­na­tive Invest­ment Fund Mana­ger Directive.

Amend and Extend Solution

Modi­fi­ca­tion and exten­sion solution

Anti-dilution regulation

In order to ensure that the venture capi­tal company does not lose its influence, protec­tion against dilu­tion can be agreed in the event of subse­quent finan­cing by means of a capi­tal increase. This protec­tion guaran­tees the fund a propor­tio­nal increase in rela­tion to the current share.

Appraisal

Valua­tion (of company components).

Artificial Intelligence (AI)

Also called arti­fi­cial intel­li­gence (AI), it is a branch of compu­ter science that deals with the auto­ma­tion of intel­li­gent behavior.

Asset Deal

Company take­over through acqui­si­tion of the indi­vi­dual assets (instead of the company shares). Oppo­site:“Share Deal”.

Assets under Management (AUM)

Refers to a finan­cial ratio that indi­ca­tes the volume of (custo­mer) funds mana­ged by a company.

B2B

Abbr. for busi­ness-to-busi­ness, expres­ses the busi­ness rela­ti­onship between companies.

B2C

Stands for busi­ness-to-custo­mer rela­ti­onships, i.e. between compa­nies and other groups, such as private indi­vi­du­als, consumers.

Back-to-back financing

In back-to-back finan­cing, loans (strings) are gran­ted at compa­ra­ble condi­ti­ons over seve­ral stages, e.g. by group compa­nies. For exam­ple, the parent company issues a loan to its subsi­diary (for exam­ple, to finance an acqui­si­tion) and raises the funds requi­red for this purpose as a loan on simi­lar terms from its share­hol­ders and/or on the capi­tal market.

BaFin

Fede­ral Finan­cial Super­vi­sory Autho­rity combi­nes the super­vi­sion of banks and finan­cial service provi­ders, insu­r­ers and secu­ri­ties trading under one roof.

Baskets

Baskets or packa­ges of receiv­a­bles found in parti­cu­lar in the area of distres­sed debt invest­ments which, in contrast to port­fo­lios on the one hand and single names/single tickets on the other, do not comprise a coher­ent port­fo­lio of homo­ge­neous loans, e.g. of a speci­fic busi­ness unit, but repre­sent a “partly arbi­trary and hete­ro­ge­neous” compi­la­tion of indi­vi­dual receivables.

Break-even

Break-even point.

Bridge Financing

Bridge Funding. Finan­cial resour­ces made available to a company to bridge a finan­cial bott­len­eck in advance of a plan­ned capi­tal increase.

Broken-Deal Expenses

See Abor­tion Costs.

Business Angels

Wealthy private indi­vi­du­als who finance and in some cases also accom­pany young compa­nies, rese­arch or inventions.

Business plan

Busi­ness plan of a company in which the plans, as well as goals and ways to achieve them, are listed and quantified.

Buy & Build (Buy-and-Build)

Buy and expand. If an invest­ment company pursues a buy-and-build stra­tegy, it acqui­res further invest­ments in the same indus­try on the basis of a company acqui­red as a plat­form, which were often in compe­ti­tion with each other, and attempts to combine them into a larger group of compa­nies and exploit synergies.

Buy Back

Exit vari­ant: Shares are bought back by exis­ting shareholders.

Caducation

Expul­sion of members of a company in case of delay in payment of their capi­tal share (addi­tio­nal contri­bu­ti­ons, if any). The defaul­ting members shall be declared to have lost their share: a) In the case of the limi­ted liabi­lity company, after the fruit­less expiry of the grace period set by regis­tered letter of min. one month (Section 21 GmbHG), b) in the case of an AG, after three unsuc­cessful requests; the grace period shall be one month from the last announce­ment or request (Section 64 AktG). 

Call option

Call or subscrip­tion option for shares in the company

Capex

This is what the Anglo-Saxon term Capi­tal Expen­dit­ure stands for. (capi­tal expen­dit­ures). These are the capi­tal expen­dit­ures of a company for longer-term fixed assets (such as new machi­nery, new factory buildings).

Carried Interest (Carry)

Profit sharing of the manage­ment company and its mana­gers in the success of the mana­ged inves­tor funds.

Carve-Out

Spin-offs of parts of compa­nies into inde­pen­dent compa­nies. Either to sell the busi­ness unit in ques­tion or to float this part of the company inde­pendently on the stock market.

Cash Conversion Cycle

In busi­ness control­ling, cash turno­ver or cash turno­ver period refers to the length of time for which liquid funds (cash) are tied up in the company’s current assets. It is calcu­la­ted from the average storage period (stock days) plus the average coll­ec­tion period (dura­tion of debt coll­ec­tion or custo­mer target) minus the average payment target with suppli­ers (supplier target).

Cash flow

A busi­ness ratio in which cash inflows and outflows within a certain period are compared (netted), ther­eby enab­ling state­ments to be made on the inter­nal finan­cing or liqui­dity of a company.

Cash free and debt free agreement

In the context of company acquisitions/sales, a cash free/debt free clause is incre­asingly being included in the SPA (Sales and Purchase Agree­ment) in Germany as well. It governs the finan­cial resour­ces with which the company is to be equip­ped at the agreed purchase price is handed over. A buyer pays a purchase price X with XY cash on hand and XY finan­cial liabi­li­ties. The purchase price is thus more precis­ely defi­ned and varia­ble. If it turns out that the cash posi­tion at the report­ing date was higher than defi­ned in the SPA, the purchase price is increased by this diffe­rence; if it subse­quently turns out that the finan­cial liabi­li­ties at the report­ing date were higher than defi­ned in the SPA, the purchase price is redu­ced accor­din­gly. Instead of the desi­gna­tion cash free and debt free regu­la­tion, also The term “net debt” refers to a “net debt” clause or a “net debt” definition.

Chinese Walls

(o. a. “ethi­cal walls”) is the name given to precau­ti­ons taken by banks to prevent the flow of infor­ma­tion between the lender side and trading in exch­ange-appro­ved secu­ri­ties (within the bank).

Closing

The comple­tion of a previously signed tran­sac­tion. Often stands a tran­sac­tion after signing is still subject to suspen­sive condi­ti­ons. Condi­ti­ons. The execu­tion, e.g. the trans­fer or issue of the shares, follows only some time later at the “closing”.

Closing accounts

If the parties agree on inte­rim finan­cial state­ments at closing, these serve in parti­cu­lar to recon­cile net finan­cial liabi­li­ties and appro­priate working capi­tal at the closing date. In some cases, net assets (net equity) are also reviewed. Closing Accounts aim to flexi­bly adjust the purchase price to the speci­fic finan­cing situa­tion at the time the buyer takes over the company.

Co-venturing

Parti­ci­pa­tion in a company by seve­ral VC inves­tors, one of whom acts as the “lead inves­tor”. See also Lead Investor.

COGS

Engl. Abbr. for Cost of Goods Sold. This refers to costs that are directly rela­ted to the goods or services produ­ced. This is the cost of sales using the cost of sales method.

Commitment Fee

Commit­ment Fee.

Completion Accounts Mechanism

Mecha­nisms for purchase price adjus­t­ments. They protect the buyer against nega­tive deve­lo­p­ments in the value of the target company prior to closing. On the other hand, they reward the seller for good corpo­rate gover­nance and gene­ra­ted cash flows between the closing date and the closing. In prac­tice, there are a variety of price adjus­t­ment mechanisms.

Compliance

Act in accordance with appli­ca­ble regulations.

Compliance Certificate

Certi­fi­cate (proof) of compliance.

Compliance Management System (CMS)

The tota­lity of measu­res, struc­tures and proces­ses estab­lished in an orga­niza­tion (e.g. in a company) to ensure confor­mity with rules, which can include legally binding and ethi­cal rules. A kind of inter­nal control system. A CMS can take on a variety of legal significance.

Confirmatory Due Diligence

Time-limi­ted exclu­si­vity for any further test­ing and final contract nego­tia­ti­ons gran­ted to a favored bidder by the seller by the seller.

Cornerstone Investors

Inves­tors in a company who, in addi­tion to the capi­tal for the invest­ment, contri­bute other factors that may be signi­fi­cant for the busi­ness policy. As a rule, it is mainly well-known indi­vi­du­als, compa­nies or even govern­ment agen­cies that act as corner­stone inves­tors. In addi­tion to capi­tal, they provide factors such as market know­ledge, foreign cont­acts or simply their repu­ta­tion on the market.

Corporate Bonds

In addi­tion to bank loans, compa­nies can also raise funds by issuing corpo­rate bonds. Corpo­rate Bonds, provide debt capi­tal via the capi­tal market. The features such as matu­rity, coupon and issue volume are explai­ned in the issue pros­pec­tus. In this context, indus­trial compa­nies often issue bonds to ensure or support the liqui­dity of the company. Parti­cu­lar atten­tion must be paid to the rating of the issuer; the credit­wort­hi­ness of the indi­vi­dual compa­nies influen­ces the inte­rest rate to be paid for the bond issued. Corpo­rate bonds with a first-class rating have a lower yield than those with a poor rating.

Corporate bonds

see corpo­rate bonds.

Corporate Finance

The term corpo­rate finance refers to a special area of finance that deals with issues rela­ting to the opti­mal capi­tal struc­ture, the company’s divi­dend policy and the evalua­tion of invest­ment decis­i­ons and the deter­mi­na­tion of the company’s value. In German lite­ra­ture, the term corpo­rate finance is used as a synonym. This term, which origi­na­tes from English-language teaching, encom­pas­ses the subjects of invest­ment apprai­sal, corpo­rate finance, corpo­rate valua­tion and capi­tal market theory tradi­tio­nally taught in German-spea­king countries.

Corporate Governance

(German: Grund­sätze der Unter­neh­mens­füh­rung) refers to the regu­la­tory frame­work for the manage­ment and super­vi­sion of compa­nies. The regu­la­tory frame­work is largely deter­mi­ned by legis­la­tors and owners. In prin­ci­ple, incom­plete contracts and diffe­rent inte­rests offer stake­hol­ders oppor­tu­ni­ties as well as moti­ves for oppor­tu­ni­stic beha­vior. Corpo­rate gover­nance regu­la­ti­ons have the task of limi­ting the scope and moti­va­tion of actors for oppor­tu­ni­stic beha­vior by means of suita­ble legal and factual arrangements.

Corporate Lab

Start-ups can be foun­ded via an orga­niza­tion-inter­nal labo­ra­tory. and success-rele­vant busi­ness models are brought to frui­tion via shared services and stage-gate processes.

Covenant Break

A too strong nega­tive devia­tion from a busi­ness plan previously defi­ned toge­ther with the banks.

Covenant Light Loans

Contrac­tual agree­ment on loans in which the lender waives colla­te­ral and rights of recourse to a large extent or, more gene­rally, sanc­tions for fail­ure to achieve certain busi­ness ratios, usually during peri­ods of low inte­rest rates on loans.

Covenants

CPECs (Convertible Preferred Equity Certificates)

CPECs are (hybrid) finan­cing instru­ments, often in cash or company shares at the debtor’s option. are repa­ya­ble. CPECs can be fixed or floa­ting rate.

CRD IV

CRD IV is a Euro­pean Union legis­la­tive package consis­ting of the Capi­tal Requi­re­ments Direc­tive (2013/36/EU) and the Capi­tal Requi­re­ments Regu­la­tion (575/2013), which sets out rules for banks, buil­ding socie­ties and invest­ment firms to hold suffi­ci­ent finan­cial resour­ces to cover the risks asso­cia­ted with their busi­ness and to meet their liabi­li­ties as they fall due. CRD IV streng­thens the exis­ting frame­work in response to finan­cial stabi­lity concerns that arose during the recent finan­cial crisis.

Cross-default clause

Contrac­tual clause commonly used in inter­na­tio­nal loan agree­ments that gives credi­tors (usually banks) the option of termi­na­ting the loan imme­dia­tely and without notice if the borrower fails to meet his obli­ga­ti­ons under other loan agree­ments on time and in full.

Crypto Securities

A special case of elec­tro­nic secu­rity (elec­tro­nic secu­rity pursu­ant to section 4 (1) of the German Secu­ri­ties Trading Act (eWpG)) and does not consti­tute a central regis­ter secu­rity (central regis­ter secu­rity pursu­ant to section 4 (2) of the German Secu­ri­ties Trading Act (eWpG)). In contrast to digi­tal assets such as cryp­to­cur­ren­cies and secu­rity tokens, the cust­ody of which requi­res a license for crypto cust­ody busi­ness (crypto cust­ody pursu­ant to Section 1 (1a) sentence 2 no. 6 KWG), the cust­ody of crypto-secu­ri­ties falls under cust­ody business.

DAC 6

Effec­tive Janu­ary 1, 2020, the law intro­du­cing an obli­ga­tion to notify cross-border tax arran­ge­ments (DAC 6) ente­red into force. With this noti­fi­ca­tion requi­re­ment, the legis­la­tor is pursuing the goal of iden­ti­fy­ing tax avoid­ance tactics at an early stage.

DD Process

Due Dili­gence Process.

DDQ

Due Dili­gence Ques­ti­on­n­aire is the name given to the list of ques­ti­ons asked in a transaction.

Dealbreaker

Knock­out criterion.

Dealflow

Total of inco­ming finan­cing requests from compa­nies to a private equity and venture capi­tal company.

Debt buy-back

The share­hol­der of the borrower acqui­res credit claims of the lender against the borrower (prefer­a­bly below par) and subse­quently redu­ces the borrower’s liabi­li­ties by contri­bu­ting the claims to the borrower.

Debt Service Reserve Account

Blocked account into which the borrower must depo­sit excess cash (’surplus money’) in good times, which then serves as a reserve in the event of a breach of the cash flow cover finan­cial covenant.

Debt-equity swap

Acqui­si­tion of the loan receiva­ble against a company with subse­quent contri­bu­tion of this receiva­ble to the company as a contri­bu­tion in kind. Company shares are gran­ted for this purpose. The contri­bu­tion in kind is regu­larly prece­ded by a capi­tal reduc­tion in order to provide the inves­tor with a higher equity share to be gran­ted. The valua­tion of the receiva­ble to be contri­bu­ted is regu­larly proble­ma­tic in such a tran­sac­tion, since a contri­bu­tion can only be made for “if neces­sary”. greatly dimi­nis­hed” repla­ce­ment value is possi­ble. This is parti­cu­larly the case since the nomi­nal value of the shares to be gran­ted must corre­spond to the repla­ce­ment value of the receivable.

Debt-to-Hold

Such a purchase of loans usually requi­res a longer invest­ment period of up to eight years; the invest­ment is held longer. Here, the loans purcha­sed at a discount are sold only after successful opera­tio­nal restructuring.

Debt-to-Trade

An approach within the frame­work of the non-control stra­tegy, which is focus on the purchase of loans for the purpose of resale to specia­li­zed Finan­cial inves­tors focu­sed. This stra­tegy is of parti­cu­lar inte­rest to the trading depart­ments of large Banks typical.

Decentralized Finance (DeFi)

Buil­ding a decen­tra­li­zed, block­chain-based ecosys­tem that provi­des finan­cial services of various types and also has signi­fi­cant inter­faces with asset manage­ment, which, howe­ver, lacks central instances for manage­ment and control (so far) — an unpre­ce­den­ted tech­no­lo­gi­cal struc­tu­ral change in the entire finan­cial sector.

Definitive taxation

A tax that must be paid defi­ni­tively and may not be credi­ted again against any other tax.

Del credere risk

Also called non-payment risk or coll­ec­tion risk. The del credere risk repres­ents the risk that a buyer will not pay the agreed price for a good on time.

Deleveraging

Compa­nies often increase the propor­tion of debt capi­tal in order to gene­rate stron­ger growth (leverage). In return, this addi­tio­nal borro­wing increa­ses the risk of no longer being able to meet obli­ga­ti­ons. Dele­ver­aging refers to the substi­tu­tion of debt capi­tal with equity capi­tal, resul­ting in a reduc­tion in leverage and thus in the risk assumed.

Delisting

Delis­ting is the name given to a process in the stock market world wher­eby a listed stock corpo­ra­tion (AG) seeks to with­draw from trading on the stock exch­ange, i.e. it wishes to remove its shares from the market and discon­ti­nue its listing.

Discounted cash flow method (DCF method)

The DCF method is a vari­ant of the capi­ta­li­zed earnings method. It is parti­cu­larly suita­ble for the valua­tion of compa­nies that use a cash flow approach in their accoun­ting. have imple­men­ted. This is likely to be the norm, espe­ci­ally for compa­nies that have been audi­ted. The DCF method is asso­cia­ted with a high compu­ta­tio­nal effort. For unlis­ted compa­nies, it can be diffi­cult to deter­mine compa­ra­tive values of other compa­nies in the same industry.

Disintermediation

(Econo­mics) descri­bes the elimi­na­tion of indi­vi­dual stages in the value chain. Thus the loss of importance of inter­me­dia­ries in the infor­ma­tion society the disin­ter­me­dia­tion of digi­tizable and non-digi­tizable goods in the global infor­ma­tion market.

Distressed debt

The term covers non-performing liabi­li­ties whose full repay­ment by the debtor is at risk; a distinc­tion is made here between non-performing loans and subper­forming loans.

Distressed Debt Investments

The acqui­si­tion of non-performing liabi­li­ties by Inves­tors who either hold on to the loan receiva­ble, the colla­te­ral or by means of a debt-equity swap in the case of corpo­rate loans. wish to acquire shares in the debtor company.

Distributed Ledger Technology (DLT)

A tech­no­lo­gi­cal infra­struc­ture used for docu­men­ting certain tran­sac­tions. In contrast to the clas­si­cal approach, in which a gene­ral ledger is usually mana­ged by only one instance, here any number of basi­cally iden­ti­cal copies of the ledger are main­tai­ned decen­trally and simul­ta­neously by diffe­rent parties. Appro­priate measu­res are taken to ensure that newly added tran­sac­tions are adopted in all copies of the ledger and that there is agree­ment (consen­sus) on the current status of the ledger at any given time.

DivestCo

Dive­s­ted Company, a spun-off company or part of a company to be spun off.

Divestment

Deno­tes the oppo­site of invest­ment. Sale of assets and equity inte­rests of a company.

Divestment at IPO

Sale of shares at the initial launch of the company on the stock exchange.

Divestment Financials

Key figu­res for dispo­sals of busi­ness units, finan­cial data for dispo­sals of share­hol­dings and rights simi­lar to share­hol­dings in companies.

Divestment through depreciation

Compa­ra­ble to total loss.

DORA Ordinance

A central pillar of the Digi­tal Finance Package is the Regu­la­tion on the “Opera­tio­nal Stabi­lity of Digi­tal Finan­cial Sector Systems and amen­ding Regu­la­ti­ons (EC) No. 1060/2009, (EU) No. 648/2012, (EU) No. 600/2014 and (EU) No. 909/2014” (Digi­tal Opera­tio­nal Resi­li­ence for the finan­cial sector = DORA).

Double Dip

If the economy still turns around after a brief upswing phase, the once into nega­tive terri­tory, this is refer­red to as a double dip. Analog­ously, this term also applied to other busi­ness risk situations.

Drag rights

In order to increase the market value of their busi­ness shares and to To secure a (further) exit stra­tegy, inves­tors regu­larly ask the foun­ders to grant them a so-called drag long right. This is a co-sale obli­ga­tion, on the basis of which inves­tors, with their own inten­tion to sell Foun­ders under certain condi­ti­ons can force their to sell shares in the company as well.

Dual track process

In this process, an IPO is prepared in paral­lel with the dive­st­ment process.

Due Diligence

Detailed exami­na­tion and evalua­tion of a poten­tial invest­ment company as a basis for the invest­ment decision.

Early Stage Financing

Finan­cing the early stage deve­lo­p­ment of a company from concep­tion to the start of produc­tion and marketing.

Earn-out clause

Earn-out clau­ses involve the deter­mi­na­tion of varia­ble purchase price compon­ents that become due at a certain point in time after the trans­fer of the company depen­ding on certain earnings compon­ents. In prac­tice, corpo­rate tran­sac­tions threa­ten to fail because the buyer and seller cannot agree on the future earnings poten­tial of the company. The aim of earn-out clau­ses is to bring a tran­sac­tion to a successful conclu­sion despite diffe­ring purchase price expectations.

EBIT

Earnings Before Income and Taxes, ordi­nary opera­ting profit before inte­rest and taxes. Used to measure earnings on a debt-free basis. Another vari­ant, EBITA, in which earnings are addi­tio­nally adjus­ted for depre­cia­tion and amortization.

EBITDA

Abbr. for Earnings Before Inte­rest, Taxes, Depre­cia­tion and Amor­tiza­tion. Means “Earnings before inte­rest, taxes, depre­cia­tion, amor­tiza­tion and impair­ment of intan­gi­ble assets”.

Entry Standard

Sub-segment of the Open Market of the Frank­furt Stock Exch­ange with addi­tio­nal trans­pa­rency requi­re­ments. This provi­des small and medium-sized enter­pri­ses with cost-effec­tive access to the capi­tal market. Inclu­sion in the Entry Stan­dard does not consti­tute a listing on an orga­ni­zed market within the meaning of Section 2 (2) of the German Stock Corpo­ra­tion Act (AktG). 5 of the German Secu­ri­ties Trading Act (WpHG). The Entry Stan­dard is prima­rily aimed at quali­fied inves­tors pursu­ant to Section 2 No. 6 of the German Secu­ri­ties Pros­pec­tus Act (Wert­pa­pier­pro­spekt­ge­setz — WpPG) who are in a posi­tion to assess and assume any increased risks asso­cia­ted with inves­t­ing in shares of the compa­nies listed here. Since July 2012, compa­nies have had to prepare a public offe­ring with a pros­pec­tus for inclu­sion in the Entry Standard.

Equity Cure law

Addi­tio­nal capi­tal brought in by the share­hol­ders of the borrower capi­tal (e.g. in the form of a capi­tal increase, a payment into the capi­tal reserve or from share­hol­der loans) may not be used under certain circum­s­tances. Requi­re­ments for the calcu­la­tion of and compli­ance with finan­cial covenants be included. The charm of an Equity Cure lies espe­ci­ally in this, that by a payment of the share­hol­der to the borrower the viola­tion of the finan­cial covenants can be avoided retro­s­pec­tively, without the credi­tor has any rights and without the banks having any Charge fees for coven­ant breakage.

Equity kicker

This is unders­tood to mean the oppor­tu­nity to parti­ci­pate in the success of the company. This can consist, for exam­ple, in the conver­sion of mezza­nine capi­tal into equity, i.e. a “real” equity invest­ment. A share­hol­ding is also conceiva­ble in the event of an inten­ded subse­quent IPO. Lenders are thus given the oppor­tu­nity to acquire shares in the part­ner­ship or corpo­ra­tion to be finan­ced at a later date, often on special terms.

Equity ratio

(The equity ratio is a busi­ness indi­ca­tor that shows the ratio of equity to total capi­tal (= total assets) of a company. The equity ratio is the most important verti­cal balance sheet indi­ca­tor that provi­des infor­ma­tion on the capi­tal struc­ture of a company. gives. It serves as the basis for finan­cing decis­i­ons within the company itself.

Equity Sponsor

Equity inves­tor

Equity Value

Equity value. The value of equity expres­sed as market value; in a tran­sac­tion, this corre­sponds to the purchase price.

ERP Special Assets

ERP = Euro­pean Reco­very Program. The fede­ral govern­ment supports start-ups and small and medium-sized enter­pri­ses by provi­ding low-inte­rest loans, equity capi­tal, quasi-equity funds and indem­ni­ties. The funds for this come from the ERP Special Fund, among others. The orig­ins of the ERP Special Fund go back a good 60 years. At that time, the U.S. provi­ded finan­cial recon­s­truc­tion aid to Germany through the “Marshall Plan.” Since then, funds have been allo­ca­ted from the special assets thus created.

ERP system

Enter­prise Resource Plan­ning System, means to control the resour­ces available in the company, the orga­niza­tion of all admi­nis­tra­tive, dispo­si­tio­nal and control­ling acti­vi­ties of a company. The goals of ERP are impro­ve­ment of orga­niza­tio­nal proces­ses and struc­tures, faster adap­ta­bi­lity to company and market chan­ges, and opti­miza­tion of busi­ness processes.

Escrow account

Escrow account.

ESG

Stands for Policy and Guide­lines with regard to Envi­ron­men­tal, Social and Gover­nance Issues.

Event of Default

Breach of Contract.

Evergreen Fund

Fund of an equity inves­tor with no limi­ted term and which is provi­ded with further capi­tal by the shareholder(s) as needed.

eWpG

(abbr.) Law on the intro­duc­tion of elec­tro­nic secu­ri­ties (since 2020).

Exit

Exit of an inves­tor from an invest­ment by sale of a share. Exit opti­ons: Buy Back, Trade Sale, Secon­dary Purchase, Going Public.

Expansion Financing

Finan­cing of corpo­rate growth that cannot be finan­ced by profits gene­ra­ted by the company alone. The funds are used to finance addi­tio­nal produc­tion capa­city, product diver­si­fi­ca­tion or market expansion.

Fact Book

Conta­ins a struc­tu­red and syste­ma­tic analy­sis and presen­ta­tion ofall essen­tial data of a company.

Failed Leveraged Buy-Out

Failed, mainly (and usually too highly) lever­a­ged take­over by finan­cial inves­tors. This in turn offers inte­res­t­ing take­over opti­ons for specia­li­zed inves­tors, most of whom acquire the loans and some of the shares. These inves­tors exces­si­vely often bring about a change in manage­ment. In their view, this is an inte­res­t­ing invest­ment segment because, on the one hand, auction prices are rarely paya­ble and, on the other hand, grea­ter exper­tise in restruc­tu­ring can be offe­red to stra­te­gic investors.

Family Office (FO)

See Single Family Office.

FATCA

Foreign Account Tax Compli­ance Act. With FATCA, the US tax autho­rity IRS inter­venes directly in all tran­sac­tions with US sources.

FFI

English Foreign Finan­cial Insti­tu­ti­ons. All banks (inclu­ding buil­ding socie­ties and coope­ra­tive banks) and insti­tu­ti­ons that hold and manage finan­cial assets for the account of third parties (brokers, custo­dian and depo­si­tory banks) gene­rally qualify as FFIs.

Financial covenants

Coll­ec­tive term for various clau­ses in loan agree­ments that oblige the borro­wing company to comply with certain ratios rela­ting to equity, debt, earnings and/or liqui­dity. Finan­cial covenants are ancil­lary provi­si­ons rela­ting in parti­cu­lar to Credit agree­ments. They regu­late beha­vi­oral obli­ga­ti­ons, i.e. not payment obli­ga­ti­ons, and contain legal conse­quence clau­ses in the form of sanc­tions. They help banks to iden­tify and coun­ter­act impen­ding defaults at an early stage and are tail­o­red to the company in ques­tion. Parti­cu­larly important are clau­ses rela­ting to earnings and cash flow ratios. These are If the covenants are brea­ched, this often leads to higher inte­rest rates on the loan and the invol­vement of exter­nal consul­tants at the company.

Financial Engineering

The brea­king down of finan­cial secu­ri­ties into their basic elements and then reas­sembling them accor­ding to the requi­re­ments of a new finan­cing struc­ture. In the case of private equity, the hall­mark is in parti­cu­lar the opti­mal utiliza­tion of debt capital.

Finetrading

(A compound word made up of finance and trade). Refers to a process of pre-finan­cing purcha­ses of goods in the SME sector.

FISG

On July 1, 2021, the Finan­cial Market Inte­grity Streng­thening Act (FISG) came into force (reason: Wire­card) and addres­ses three regu­la­tory comple­xes: corpo­rate gover­nance, the balance sheet control proce­dure (enforce­ment) and the audit of finan­cial state­ments. The new regu­la­ti­ons parti­cu­larly affect the manage­ment boards and super­vi­sory boards of capi­tal market-orien­ted compa­nies. Central to this: Incre­asing importance of manage­ment and control systems (espe­ci­ally ICS & RMS), quali­fi­ca­tion and duties of the (future manda­tory) audit commit­tee and reor­ga­niza­tion of the balance sheet control proce­dure under the sole respon­si­bi­lity of BaFin.

Freebie Basket

Allo­wance

Fronting Bank

The term “fron­ting” comes from the credit busi­ness and here in parti­cu­lar from the syndi­ca­tion of loans. The fron­ting bank repres­ents the sub-parti­ci­pa­ting banks in its own name, but for the account of a third party. The bank issuing the loan is ther­e­fore on the “front line” vis-à-vis the borrower.

Fund of Funds

Umbrella Fund, which uses the funds accruing to it for the purpose of the Risk diver­si­fi­ca­tion predo­mi­nantly in invest­ments in other directly inves­t­ing invest­ment compa­nies without taking a direct stake in companies.

Fundraising

Raising invest­ment capi­tal for the purpose of estab­li­shing a holding company.

GAFA Analysis

Compa­ri­son of company posi­tio­ning with Google, Amazon, Face­book and Apple.

General Partner (GP)

The gene­ral part­ner­ship is the most common form of Ameri­can part­ner­ship. Common term for venture capi­tal or private equity companies.

Going Public

Intro­duc­tion of the company to the stock exchange.

Hands On

Active Care.

Headroom

The margin agreed with the lenders between the target figu­res and the coven­ant, so that even normal opera­ting fluc­tua­tions do not lead to a breach of the finan­cial covenants.

High yield bonds

have largely the same inves­tors as lever­a­ged loans, albeit fewer pension funds and banks and more hedge funds. A high yield bond is a debt instru­ment issued by corpo­ra­ti­ons. Both lever­a­ged loans and high yield bonds comprise the fixed income market rated below invest­ment grade and are gene­rally rated lower than BBB-.

HoldCo

Merging a U.S.-listed SPAC and a target company in Europe often requi­res first estab­li­shing a Euro­pean company (HoldCo) in which the SPAC and the target merge through a series of legal steps.

HR Services

Human Resour­ces Services, Human Resour­ces Consul­ting Services.

Hurdle rate

refers to a certain mini­mum return or break-even point that a fund must achieve in order for the fund manage­ment to parti­ci­pate in the fund’s profits. As a rule, the hurdle rate is applied prima­rily to so-called private equity or venture capi­tal funds.

ICT risks

Risks that can arise from infor­ma­tion, commu­ni­ca­tion, technology.

ILPA Private Equity Principles

(ILPA = Insti­tu­tio­nal Limi­ted Part­ner Asso­cia­tion) to estab­lish binding proce­du­res regar­ding fund part­ner­ships between limi­ted part­ners and gene­ral part­ners, ILPA deve­lo­ped the Private Equity Prin­ci­ples (Prin­ci­ples), the first docu­ment of its kind for the private equity industry.

In-Court Sale

Trans­fer­red reor­ga­niza­tion in which the assets and legal rela­ti­onships that make up the company’s busi­ness opera­ti­ons are trans­fer­red to stra­te­gists (e.g.competitors) or finan­cial investors.

Incentivization

Perfor­mance incen­tive, perfor­mance pay.

Investment grade rating

In finance, a rating is the ordi­nally scaled clas­si­fi­ca­tion of the credit­wort­hi­ness of a company or finan­cial instru­ment. The rating is usually carried out by a rating agency or a credit institution.

InvStG

Abbr. for Invest­ment Tax Act.

IoT

The Inter­net of Things is a coll­ec­tive term for tech­no­lo­gies of a global infra­struc­ture of infor­ma­tion socie­ties, which enables physi­cal and virtual objects to be networked and to work toge­ther through infor­ma­tion and commu­ni­ca­tion technologies.

IPO

Term for the initial public offe­ring of shares in young and medium-sized compa­nies on a stock exch­ange (see also ‘Pre-IPO’).

IRR

Inter­nal rate of return of a payment series.

IRS

Abbr. for Inter­nal Reve­nue Service, the United States fede­ral tax agency under the Depart­ment of the Treasury.

JOBS Act

Abbr. for Jump­start Our Busi­ness Start­ups Act, a new U.S. fede­ral law aimed at incre­asing job crea­tion and econo­mic growth in the United States by impro­ving access to the U.S. public capi­tal market.

KGV

Price-earnings ratio.

KPI

Abbr. for Key Perfor­mance Indi­ca­tor. The term refers to key figu­res that can be used to deter­mine the perfor­mance of acti­vi­ties in compa­nies. Which KPIs should be looked at to measure success or fail­ure depends on the company, the measure in ques­tion, and its goals.

KWG

Banking Act.

KYC

Abbr. for Know-your-Custo­mer Prin­ci­ple, (English for “Get to know your custo­mer”). This refers to the veri­fi­ca­tion of perso­nal and busi­ness data of new custo­mers of a credit insti­tu­tion for the preven­tion of money laun­de­ring and terro­rist finan­cing on the basis of the Money Laun­de­ring Act 2008.

Large Cap

Shares are divi­ded into large caps, mid caps and small caps accor­ding to their market capi­ta­liza­tion, wher­eby the term “cap” is short for capi­ta­liza­tion. Market capi­ta­liza­tion is calcu­la­ted by multi­ply­ing the number of shares of the company traded on the stock exch­ange by the current share price. Large caps, the compa­nies with the highest stock market value, include those with a market capi­ta­liza­tion of over two billion euros. Mid caps are compa­nies with a market capi­ta­liza­tion of between 500 million and two billion euros, while small caps have a market capi­ta­liza­tion of less than half a billion euros. Small caps are the equity cate­gory with the highest expec­ted returns.

Later Stage Financing

Finan­cing of expan­si­ons, acqui­si­ti­ons, bridging, etc. for estab­lished medium-sized companies.

LBO (Leveraged Buy-Out)

Predo­mi­nantly debt-finan­ced corpo­rate acquisitions.

Lead investor

The inves­tor party, which is in a syndi­cate of inves­tors the nego­tia­tion and orga­niza­tion of the finan­cing round.

Legal Due Diligence

Legal inves­ti­ga­tion of all exis­ting contracts.

LegalTech

also Legal Tech­no­logy, descri­bes the use of modern, compu­ter-based, digi­tal tech­no­lo­gies to auto­mate, simplify and improve legal disco­very, appli­ca­tion, access and admi­nis­tra­tion through innovation.

Leverage

Leverage.

Leverage effect

Term for the leverage effect of debt capi­tal, which is then arises when the return on assets is higher than the return on debt. The inte­rest rate to be paid on the same amount of borro­wed capi­tal is a higher return than would be the case if the invest­ment were made solely with equity capi­tal. would be the case. The diffe­rence between the inte­rest payments and the inte­rest paya­ble on the Accor­din­gly, the return on debt capi­tal repres­ents the leverage effect.

Leverage ratio

Debt finan­cing portion of a private equity tran­sac­tion. For conser­va­tive finan­cing, the leverage ratio is 50–60%; for progres­sive finan­cing, leverage ratios of over 90% are rarer than in the 1980s, for example.

Leveraged Buy-Out (LBO)

(engl.) Debt-finan­ced take­over, refers to the acqui­si­tion of a company with the inclu­sion of a large propor­tion of borro­wed capi­tal to settle the purchase price. Usually, the exclu­sive or predo­mi­nant secu­rity for the acqui­si­tion finan­cing is provi­ded by the target company and its assets.

Leveraged Loans

Subgroup of syndi­ca­ted loans, i.e. loans distri­bu­ted among seve­ral credi­tors, which are usually senior secu­red (i.e. senior to other liabi­li­ties clas­si­fied as junior or subor­di­na­ted) and which, accor­ding to the various hete­ro­ge­neous defi­ni­ti­ons, either (1) are not invest­ment grade (i.e. below BBB+) or (2) have a debt-to-EBITDA ratio of 3.0 or more or (3) are priced more than 150 basis points above the London Inter­bank Offe­red Rate (LIBOR).

Limited Partner (LP)

A limi­ted part­ner­ship is an Anglo-Saxon legal form of a company that is compa­ra­ble to a German limi­ted part­ner­ship and consists of at least two part­ners. The gene­ral part­ner of a limi­ted part­ner­ship is the gene­ral part­ner (GP), who also holds the manage­ment and power of repre­sen­ta­tion of the company. The inves­tors parti­ci­pate as limi­ted part­ners in a simi­lar way to share­hol­ders or limi­ted partners.

Liquidation preferences

Contrary to what the wording suggests, this provi­sion does not only regu­late the distri­bu­tion of surplu­ses from the liqui­da­tion of a company, but also the distri­bu­tion of proceeds in the event of an exit or compa­ra­ble measures.

Litigation

Liti­ga­tion.

Loan-to-own strategy

Specia­li­zed inves­tors try to realize the value of non-performing loans by swap­ping them for shares in the company, usually without consul­ting manage­ment or the exis­ting share­hol­ders, in order to parti­ci­pate in the expec­ted increase in the value of the company. If successfully imple­men­ted, this stra­tegy can gene­rate high returns or prevent bad debts in the event of impen­ding insolvency.

Locked Box Principle

As an alter­na­tive to the concept of ‘closing accounts’, the so-called locked box prin­ci­ple has also become estab­lished in recent years. Concep­tually, this prin­ci­ple is not about adjus­ting the purchase agree­ment, but rather about the parties working towards an inte­rim closing as close in time as possi­ble refe­rence, which is usually guaran­teed by the seller. The seller then addi­tio­nally guaran­tees the buyer that no direct or indi­rect outflows (usually liqui­dity outflows, e.g. divi­dends) have been made to the seller or rela­ted third parties since the inte­rim balance sheet date. Any profit gene­ra­ted in the mean­time shall accrue to the bene­fit of, and any loss to the to the disad­van­tage of the buyer. The seller achie­ves price secu­rity through the fixed purchase price; subse­quent purchase price adjus­t­ments can at most still result from warranty or contract viola­ti­ons. In addi­tion to the fixed purchase price, inte­rest is often agreed on the purchase price until the closing date.

LP

Abbr. for Limi­ted Part­ner­ship. Equity funds are typi­cally orga­ni­zed as limi­ted part­ner­ships with a fixed term of 10 years.

M&A (Mergers and Acquisitions)

Mergers and acquisitions.

MAC clauses (Material Adverse Change)

Are attri­bu­ted to the finan­cial covenants. The abbre­via­tion for MAC stands for Mate­rial Adverse Change, which trans­la­tes as a ‘mate­rial adverse change’ in the basis and circum­s­tances of a tran­sac­tion. As a rule, the refe­rence point is the net assets, finan­cial posi­tion and results of opera­ti­ons of the target company at the time the agree­ment is concluded.

Machine Learning

Forms a subfield of arti­fi­cial intel­li­gence rese­arch and at the same time an umbrella term for other tech­no­lo­gies. The term In very simpli­fied terms, refers to a process in which an arti­fi­cial system is trai­ned using an algo­rithm based on examp­les, but without simply memo­ri­zing and later matching them, but rather reco­gni­zing and gene­ra­li­zing recur­ring patterns in the examp­les. The system is then able to analyze even unknown data in order to derive Extract infor­ma­tion based on proba­bi­li­ties. appli­ca­ti­ons are curr­ently among the most sought-after AI-based technologies.

Marketmaker

provide sales prices for invest­ments, process sales and thus create liqui­dity in a market.

Material Adverse Effect Clause

(= MAC clause).If a signi­fi­cant dete­rio­ra­tion is of the borrower’s circum­s­tances occurs, which is asso­cia­ted with a certain likeli­hood that the borrower will not be able to meet his obli­ga­ti­ons. can no longer comply with the credit agree­ment, the lender shall the right to call in the loan.

MBI (Management Buy-In)

Acqui­si­tion of a company by an exter­nal Management.

MBO (Management Buy-Out)

Take­over of the company by the exis­ting management.

MENA Investors

Inves­tors from the Middle East & North Africa region.

MEP (Management Equity Participation)

Manage­ment shareholding

Mezzanine

Finan­cing funds that bridge the finan­cing gap between exter­nal and Equity capi­tal in the capi­tal struc­ture and both equity and debt capi­tal charac­ter have Forms commonly used in Germany: partia­ri­sche Darle­hen, Share­hol­der loans, prefer­red shares, profit parti­ci­pa­tion certi­fi­ca­tes, silent part­ner­ship, Seller’s Notes.

Mid Caps

see Large Caps.

MoRaKG

German Act to Moder­nize the Frame­work Condi­ti­ons for Equity Investments.

Moral Hazard

The English term for moral hazard. This refers to the risk that a person will behave immo­rally or care­lessly because an insu­rance policy, law, or other insti­tu­tion protects in the event of losses that would other­wise result from his or her behavior.

Mulligan clause

Accor­din­gly, a first breach of finan­cial covenants does not yet lead to the far-reaching legal conse­quen­ces of an event of default. Rather, the borrower is gran­ted a grace period in which compli­ance with the covenants in the subse­quent period will cure the breach. With other Words: a loan agree­ment viola­tion under the mulligan clause occurs only if the borrower has viola­ted the finan­cial covenants for two conse­cu­tive test periods.

Net debt reconciliation

Cash and cash equi­va­lents and compa­ra­ble assets are netted against finan­cial liabi­li­ties, in parti­cu­lar medium- and long-term liabi­li­ties to banks, but also in some cases “quasi-finan­cial liabi­li­ties” such as taxes, pensi­ons and, where appli­ca­ble, other deduc­ti­ble items agreed by the parties.

Net Worth Covenant

A certain ratio of liabi­li­ties to equity.

Non-financial covenants

They mainly concern the colla­te­ral ranking clau­ses. A distinc­tion must be made here between nega­tive clau­ses, posi­tive decla­ra­ti­ons and equa­lity obli­ga­ti­ons. Typi­cally, the prac­tice knows combi­na­ti­ons. A viola­tion of a nega­tive clause leads, for exam­ple, to the follo­wing often to the obli­ga­tion to provide appro­priate security.

Non-performing loans

Non-performing loans. A default occurs as soon as the debtor defaults or only meets its payment obli­ga­ti­ons to a limi­ted extent. From Non- Performing loans are refer­red to in parti­cu­lar as soon as the debtor is three (accor­ding to a recom­men­da­tion of the Bank for Inter­na­tio­nal Sett­le­ments) to six months in arrears.

Notary escrow account

In gene­ral, an escrow account is an account held in trust but in the notary’s own name (i.e. in the name of the notary).

ParentCo

Parent Company.

Pari-passu liabilities

Equal-ranking claims (Latin pari passu — “in the same step”)

Payment in Kind (PIK)

Bonds that grant their issuer the option for a defi­ned period of time either to make the inte­rest payments due in cash on the coupon date or to trans­fer to the bond­hol­ders a bond in the equi­va­lent amount of the inte­rest payments due.

PECs (Preferred Equity Certificates)

PECs are (hybrid) finan­cing instru­ments, which are reco­gni­zed by the Luxem­bourg borrower as a taxa­ble and qualify as debt on the balance sheet. PECs can have fixed or varia­ble inte­rest rates.

Penalty

Fine.

PIPE

Private invest­ment in public equity (private invest­ments in publicly listed companies).

Playing the Yield Curve

Assess­ment of the return/risk curve, i.e. inves­tors demand a higher return for higher risk.

Pledge Funds

Pledge funds, or co-invest­ment clubs, are basi­cally custo­mi­zed invest­ment models used by mana­gers as an alter­na­tive struc­ture to the tradi­tio­nal private equity fund.

Post-Money Valuation

Refers to the enter­prise value that alre­ady includes the capi­tal contri­bu­ted by the VC/PE inves­tor. This method is used when the invest­ment does not increase value, but merely main­ta­ins it.

PPP (Public Private Partnership)

Abbre­via­tion for public-private part­ner­ship (PPP), which is predo­mi­nantly unders­tood as coope­ra­tion between the public sector and private industry.

Pre-IPO

Company phase imme­dia­tely before the IPO.

Pre-Money Valuation

This refers to the desi­gna­ted enter­prise value prior to a finan­cing round.

Prepayment

Prepay­ment.

Pricing

Pricing or pricing policy deals with the analy­sis, deter­mi­na­tion and moni­to­ring of prices and condi­ti­ons of produc­tion or services and is part of the distri­bu­tion policy of a company.

Primary market

Finan­cial market for the initial issue of secu­ri­ties (issu­ance) and their sale (place­ment). Synonym: issue market; oppo­si­tes: Secon­dary market, circu­la­tion market

Private debt

includes borro­wed funds provi­ded prima­rily by insti­tu­tio­nal inves­tors usually outside the banking sector. Private debt is defi­ned here as the provi­sion of debt capi­tal to compa­nies prima­rily by insti­tu­tio­nal inves­tors outside the capi­tal market. Debt and mezza­nine secu­ri­ties, most of which do not have an invest­ment grade rating.

Private Equity (PE)

Private high-yield bonds

Priva­tely placed high-yield bond.

Private placement

Special form of IPO: Secu­ri­ties of a company are only offe­red to a selec­ted group of inves­tors and not publicly via the stock exch­ange. If a company wishes to list its shares on the stock exch­ange, either the company itself (self-issue) or the issuing bank (third-party issue) can sell the shares to selec­ted inves­tors. If the share­hol­ders are exclu­si­vely so-called quali­fied inves­tors (e.g. banks, funds) or if there are less than 100 non-quali­fied inves­tors within the entire EU, the company is not subject to the pros­pec­tus requi­re­ment (see Art. 2 (1e) EU-PR Euro­pean Pros­pec­tus Directive).

Private Placement Memorandum (PPM)

Via a private place­ment as a “public place­ment”, a private place­ment memo­ran­dum (inves­tor memo­ran­dum) or in short form as an invest­ment fact sheet can be used to raise capi­tal to improve liqui­dity in the company.

Protective shield proceedings

Repres­ents a combi­na­tion of the enforce­ment stop of the preli­mi­nary insol­vency procee­dings and self-admi­nis­tra­tion. The latter is initi­ally orde­red for a maxi­mum of three months in order to work out an insol­vency plan for the insol­vent company.

Public to Private

A listed company is delis­ted in order to carry out acquisitions/divestments of parts of its opera­ti­ons, restruc­tu­ring, etc.

Purchase Multiple

Purchase price of a port­fo­lio company as a multi­plier of EBITDA.

Purchase Price

Purchase price.

QI (Qualified Intermediary)

A quali­fied inter­me­diary is an insti­tu­tion clas­si­fied by the IRS as a quali­fied inter­me­diary, wher­eby a U.S. audi­tor audits the compli­ance of foreign banks, etc.

Quantitative easing

(or QE from English quan­ti­ta­tive easing) refers to an uncon­ven­tio­nal form of expan­sion of the mone­tary base (expan­sio­nary mone­tary policy) by a central bank. In this process, the central bank purcha­ses mostly long-term private or public secu­ri­ties, usually govern­ment bonds, from commer­cial banks.

Request for Proposal (RfP)

Invi­ta­tion to bid.

Reset Deals

tran­sac­tions that provide for a price adjus­t­ment. The issue amount of the shares or the conver­sion ratio of a conver­ti­ble bond may be adjus­ted down­wards (or upwards) depen­ding on various crite­ria, depen­ding on the agree­ment. These crite­ria may include, for exam­ple, the issuer’s share price at a parti­cu­lar point in time. See also under varia­ble deals.

SEC

The United States Secu­ri­ties and Exch­ange Commis­sion is the U.S. Secu­ri­ties and Exch­ange Commis­sion respon­si­ble for over­see­ing secu­ri­ties trading.

SEC filings

Reports and docu­ments that a company listed on a U.S. stock exch­ange must submit to theSecu­ri­ties Exch­ange Commis­sion ( SEC) at regu­lar inter­vals or when certain events occur. This includes, for exam­ple, quar­terly reports, annual finan­cial state­ments, etc.

Second Lien Capital

As a rule, subor­di­na­ted finan­cing to exis­ting financing.

Second Round Financing

The second round of finan­cing for a company that has alre­ady recei­ved venture capi­tal or private equity in a first round.

Secondary market

In finance, refers to a market in which market parti­ci­pants acquire or resell finan­cial instru­ments alre­ady in circu­la­tion as a trading asset. Comple­men­tary term is the primary market.

Secondary Market

A market or exch­ange for secu­ri­ties which are bought or sold follo­wing their initial sale. Secon­dary liqui­dity is the trading volume in these­con­dary market

Secondary Public Offering (SPO)

Capi­tal increa­ses by placing addi­tio­nal company shares with inves­tors via an IPO.

Secondary Purchase

Secondary transactions

In secon­dary private equity (PE) tran­sac­tions, the exis­ting (partial) port­fo­lio of PE inves­tors (e.g. venture capi­tal, bridge, buy-outs, mezza­nine, etc.) is sold. The sale of indi­vi­dual funds or parts thereof is usually initia­ted by the inves­tor; howe­ver, it can also be initia­ted by the manage­ment of the PE houses. The sale enables the Inves­tors gene­rate liqui­dity immediately.

Seed Capital Financing

Seggregated Account

Sepa­ra­tely mana­ged account.

Seller’s Notes

Purchase price defer­rals. ‘Left stan­ding’ Purchase price receiv­a­bles on the part of the sellers, effec­tively a seller’s loan.

Senior debt

In the narrower sense: refer­ring to colla­te­ral and senior finan­cing lines in an acqui­si­tion finan­cing struc­ture; in the broa­der sense: gene­ric term for unsub­or­di­na­ted funds in an acqui­si­tion financing.

SG & A

Engl. Abbr. for Sales Gene­ral and Admi­nis­tra­tive Expense. This refers to sales over­heads, all direct and indi­rect costs incur­red in the distri­bu­tion of products but not directly attri­bu­ta­ble to the indi­vi­dual product — for exam­ple, costs for the storage of finis­hed products, for the sales office, advertising.

SICAF (Société d’Investissement à Capital Fixe)

Franz. Abbr. for société d’in­ves­tis­se­ment à capi­tal fixe. Desi­gna­tion for the legal form of a Luxem­bourg invest­ment corpo­ra­tion with fixed capi­tal. Oppo­site of SICAV.

SICAR (Société d’Investissement en Capital à Risque)

A SICAR is a corpo­ra­tion under Luxem­bourg law whose funds are inves­ted in risk assets (risk capital).

SICAV (Société d’Investissement à Capital Variable)

A joint stock company, parti­cu­larly common in France and Luxem­bourg, which has corpo­rate bodies as well as a mini­mum capi­tal. The purpose of the SICAV is limi­ted to the invest­ment of the company’s capi­tal in secu­ri­ties in accordance with the prin­ci­ple of risk diver­si­fi­ca­tion as prescri­bed by the KAGG for German invest­ment companies.

Side Car Vehicle

Struc­tures for sepa­rate inves­tor parti­ci­pa­tion to top up an exis­ting private equity fund within its regu­lar term.

Single Family Office (SFO)

The term Family Office comes from the English language and refers to a company whose purpose is the manage­ment of the large private assets of a family of owners.

Single Names

Indi­vi­dual receiv­a­bles or at least third-party liabi­li­ties of indi­vi­dual companies.

Single tickets

Corre­sponds to Single Names

Small Caps

small compa­nies traded on stock exch­an­ges. In gene­ral, compa­nies whose market capi­ta­liza­tion is less than €256 million and which are also shown to have parti­cu­larly strong growth are refer­red to as small caps; see also large caps.

Smart Contracts

Soft­ware programs that allow, among other things, the imple­men­ta­tion and compli­ance with contracts using DLT (Digi­tal Ledger Technology).

SME

Abbr. for Small and Mid-size Enter­pri­ses.

Social Return on Investment (SROI)

SROI is a method that measu­res the return on social invest­ment. The assump­tion is that every contri­bu­tion made by a subs­idy provi­der (non-profit funds, the state) to a social-social project is in effect an ‘invest­ment’ in that project, and ther­e­fore also can be judged as such.

Spin-Off

Spin-off and inde­pen­dence of a divi­sion or part of a company from a company/group.

Squeeze-Out

Exclu­sion of mino­rity share­hol­ders. A share­hol­der who owns at least 95 percent of the share capi­tal of a stock corpo­ra­tion (prin­ci­pal share­hol­der) may request that the Annual Gene­ral Meeting resolve to trans­fer the shares of the other share­hol­ders to him. Once the trans­fer reso­lu­tion has been ente­red in the Commer­cial Regis­ter, the prin­ci­pal share­hol­der auto­ma­ti­cally acqui­res all the remai­ning shares in the Company in return for a cash settlement.

Stage Gate Innovation Process

Serves to opti­mize inno­va­tion and deve­lo­p­ment proces­ses, with multi-laye­red objec­ti­ves, e.g. crea­tion of new products/services, shar­per focus and better prio­ri­tiza­tion in the deve­lo­p­ment process as well as quality impro­ve­ment and risk mini­miza­tion in proces­ses. The basis is the three-stage “filter system”: corpo­rate policy filter | tech­ni­cal filter | econo­mic filter.

Standalone

Stand alone — an inde­pen­dent business.

Start Up Financing

Start-up finan­cing. The company in ques­tion is in the start-up phase, is in the process of being estab­lished or has only been in busi­ness for a short time and has not yet marke­ted its products on a larger scale.

Sub-Performing Loans

Loans where a minor default alre­ady exists (e.g., redu­ced repay­ment perfor­mance) or is expected.

Tag Along Law

The mirror image right for foun­ders to the Drag Along right is the so-called Tag Along right. This is a co-sale right that entit­les foun­ders, under certain condi­ti­ons, to sell their shares as well when inves­tors sell their own shares.

Tag and Drag Rights

Contrac­tual co-sale rights and obli­ga­ti­ons that take effect in the event of a sale of blocks of shares. If a share­hol­der wishes to sell his shares, the tag-along right allows the finan­cial inves­tor to sell his shares to the buyer under the same condi­ti­ons. If the acqui­rer does not wish to acquire the addi­tio­nal shares, the sellers will receive a pro rata share. Conver­sely, the selling finan­cial inves­tor can demand that the remai­ning share­hol­ders sell their shares to an inte­res­ted buyer on the same terms (drag-along right). This allows the finan­cial inves­tor to offer a larger package overall.

Tax Compliance

Refers to the willing­ness of citi­zens, inves­tors, etc. to volun­t­a­rily comply with appli­ca­ble tax laws and to fulfill tax obli­ga­ti­ons correctly.

Tax Compliance Management System (TCMS)

A fiscal compli­ance system to iden­tify and docu­ment respon­si­ble proces­ses and respon­si­ble parties. The docu­men­ta­tion is inten­ded to exone­rate the company and its manage­ment in case of doubt from accu­sa­ti­ons of reck­less actions in the case of errors that led to redu­ced taxes.

Tax due diligence

Inves­ti­ga­tion of fiscal risks.

Tokenization

The trend in finance and secu­ri­ties law to digi­tize finan­cial products as crypto assets and map them on a block­chain as decen­tra­li­zed stored assets. The trend is away from the clas­sic paper form of a carrier medium to digi­tal data. Examp­les include the use of book money instead of cash, the intro­duc­tion of cryp­to­cur­ren­cies, or the intro­duc­tion of elec­tro­nic secu­ri­ties instead of secu­ri­ties certi­fi­ca­tes. In all of them, the paper form as a carrier medium for finan­cial instru­ments is being repla­ced (toke­ni­zed) by digi­tal forms.

TopCo

Abbre­via­tion for top company or parent company.

Track Record

Success and expe­ri­ence story of an invest­ment company or a company and its management.

Trade Sale

Sale of the shares in the company to an indus­trial or stra­te­gic investor.

TSAs

Abbr. for Tran­si­tio­nal Service Agree­ments — tran­si­tion contracts.

Uncommitted Accordion Facility

Commit­ment of the banks to think about incre­asing the amount of the loan without being obli­ged to increase it.

Underwriting

The accep­tance of a parti­cu­lar tran­sac­tion risk by a bank or insu­rance company. Z. E.g. under­wri­ting decis­ion in insu­rance and reinsu­rance busi­ness. This also includes the review and assess­ment of (re)insurance risks, incl. the deter­mi­na­tion of an appro­priate premium.

Underwriting Process

The process or signing of the assump­tion of risk.

Unicorn

Unicorns are young compa­nies that are valued at at least one billion US dollars. In total, 40 Euro­pean compa­nies and a total of 229 compa­nies have cracked the billion mark (Janu­ary 2016). These include Uber, Xiaomi, Airbnb, Palan­tir, Snap­chat, Drop­box and Pinterest.

US GAAP

Abbr. for United States Gene­rally Accepted Accoun­ting Principles.

Utilization Fees

Utiliza­tion Fee.

Variable Deals

In a varia­ble-price tran­sac­tion, the issue amount of the shares or the conver­sion ratio of a conver­ti­ble bond chan­ges depen­ding on the Company’s share price after closing. See also under reset deals.

Vendor

the seller, supplier

Vendor Due Diligence

The vendor due dili­gence is a due dili­gence commis­sio­ned by the seller, in the context of which an exter­nal consul­tant analy­zes and evalua­tes the object of sale in the func­tion of a neutral expert. It is not only an essen­tial basis for the seller’s evalua­tion of the company and its risks, but also serves as a “arma­men­ta­rium” for the later negotiations.

Vendor Loan/ Vendor Financing

An agree­ment made prima­rily in connec­tion with the purchase of shares in a company (some­ti­mes also of shares in a package), wher­eby the seller provi­des all or part of the purchase price as a loan to the buyer (vendor loan; also often used in German). Often prac­ti­ced in connec­tion with seed capi­tal; the foun­der brings the shares of the bank or other inves­tors into his company in this way (as share capital).

Vendor Services

Services provi­ded to the seller of a company to help him/her achieve an opti­mal posi­tio­ning for the (partial) sale.

Venture Capital (VC)

Liable equity capi­tal (also risk or venture capi­tal), which is usually provi­ded toge­ther with entre­pre­neu­rial advice from the inves­tor. Venture capi­tal is a special form of equity capi­tal (private equity).

Venture debt

is a form of debt finan­cing gran­ted by banks or funds as a supple­ment to equity finan­cing during the growth phases of a young company.

Venture Leasing

Venture capi­tal finan­ced by fixed assets for start­ups and young compa­nies in return for leasing fees.

Venture Loan

Loan from a venture capi­tal provi­der to a company from its own funds (inde­pen­dent of banks).

Waiver

Suspen­sion, release, annul­ment, remis­sion (of the breach of contract).

Waiver Fee

A sanc­tion, e.g. inte­rest rate increase or post-colla­te­ra­liza­tion, in the event of a waiver agree­ment for the coven­ant breach.

Warehousing

By pre-funding target fund invest­ments, the invest­ment mana­ger (of a fund) can make early commit­ments during the under­wri­ting phase.

Warrants

Warrants: secu­ri­ties of a company that grant the owner the right to acquire shares in the company at an agreed price in the future.

WKBG

Venture Capi­tal Parti­ci­pa­tion Act.

Working capital

Working capi­tal is the diffe­rence between current assets and current liabi­li­ties. This diffe­rence and also the quoti­ent, the so-called working capi­tal ratio, serve as indi­ca­tors of the liqui­dity situa­tion of a company and are parti­cu­larly important for the Credit scoring important.

Working Capital Management (WCM)

As part of working capi­tal manage­ment, this indi­ca­tor in conjunc­tion with other key figu­res and analy­ses can be used to iden­tify opti­miza­tion poten­tial in warehousing or receiv­a­bles manage­ment and to iden­tify weak­ne­s­ses in paya­bles management.